Explore your mortgage options
Getting divorced can be a challenging process. Even when the split with your spouse is completely amicable, divorce represents a new chapter in your life that – from a financial, social and emotional perspective – can be difficult to prepare for.
One of the hardest questions to answer following a divorce is, “Who gets to keep the house?”
Whether the house is turned over to a single spouse or put up for sale on the market, most divorces result in at least one person needing to find a new place to live. The good news is, if you’re looking to buy a house following a divorce, you’re certainly not alone, and there are many resources available to help make the process easier.
In this guide, we’ll answer some of the most pressing questions you might have about buying a house after a divorce. Before making a major financial decision, it’s important to explore your options and come up with a plan.
What To Know About Buying a House After a Divorce
It can be easy to feel vulnerable after a divorce, especially if your finances were directly tied to your spouse’s for an extensive period of time. It’s also likely that your house was one of your largest sources of equity, and the divorce itself cost quite a bit of money.
Contrary to what you might have heard, buying a house after a divorce is very possible. However, every situation will be different. The value of your previously shared assets, the nature of the divorce (whether or not it was amicable) and even the state(s) you live in can all have a direct impact on the home buying process.
Working with a divorce attorney or a real estate agent who specializes in these situations can be very beneficial.
Keeping this in mind, it’s important to take inventory of your current financial and personal situation. Before making any major moves, start by asking yourself the following questions:
Is the divorce finalized?
In most cases, a divorce isn’t something that happens overnight.
The divorce process can take weeks, months or even years. Also, your marriage represented a legal contract. That means you’ll need to act to “resolve” this contract, usually in the form of divorce proceedings, before you can make certain financial decisions.
If your divorce is not legally finalized, the home buying process can be a bit more difficult. If you are not yet formally divorced, with a divorce settlement in hand, most mortgage lenders will require a legal separation agreement before you’ll be able to purchase a home on your own.
Lenders will also require you to prove sufficient assets or income, as well as ensure that you’ll be able to make your monthly mortgage payments on your own. So the sooner you can finalize all official paperwork, the easier the home buying process will be.
Is your name still on the previous mortgage?
Another factor to consider is whether your name is on the previous mortgage. Having your name on the mortgage – regardless of whether the divorce has been finalized – will directly affect both the equity you can claim as well as your future financial obligations.
Some questions you’ll need to consider are:
- Who is responsible for monthly payments on the mortgage during the divorce process?
- Does one spouse have a greater claim to the marital home? This is especially important if you don’t live in a community property state.
- If your ex-spouse is keeping the home, are they taking out a new mortgage in their name or refinancing?
- Who is responsible for covering closing costs if the house is sold?
- If you agree to cash out by selling the home, does your spouse’s name stay on the mortgage or are you offering them a buyout now in exchange for getting the full sale price later?
In many cases, you may need to modify the title using a quitclaim deed. Most title companies have processes in place that can help you change your current title while also restructuring the current equity allocation.
How are your finances?
If you’ve recently gotten divorced (or are in the process of getting divorced), it’s a good idea to take inventory of your current sources of monthly income as well as your monthly expenses.
Within the mortgage industry, a bit of flexibility is usually afforded to recent divorcees, especially if they have excellent credit. But lenders will also want to see that your income, without your spouse’s share, is significantly higher than your current debt obligations. If it’s not, you might need to make some financial changes before considering the possibility of buying a home.
Tips on Buying a House After a Divorce
If you’ve recently gotten divorced and are considering buying a home, the first bit of advice we can give is to take a deep breath. It can be easy to become overwhelmed by this process, especially if you’re dealing with the sudden changes and emotional stress divorce typically entails.
Consider all available options before making any permanent decisions. Be sure to keep these important pieces of post-divorce advice in mind:
Consider renting before buying a new house
Many people who have recently gotten divorced will want to immediately buy a home. After all, it’s likely they’ve been building equity in their home (shared with their spouse) for years and will want this sort of equity accumulation to continue.
But the process isn’t always easy and will typically require a bit of patience. Instead of immediately jumping back into homeownership, consider taking some time to rent a property while you figure things out. This will give you the flexibility and time you need to make the best decision for your situation.
Be realistic about what you can afford
It’s also easy to be tempted to buy a home like the one you used to live in. But don’t forget that your financial and living situation has significantly changed.
If you’re paying alimony or child support, this can affect your take-home pay. Also, if you’re receiving alimony or child support, these payments may not continue for the length of a mortgage loan.
When writing a mortgage, lenders will also consider your debt-to-income (DTI) ratio. Any decrease in income without an equal decrease in debt will leave you in a more difficult financial situation. Generally, anyone who has recently gotten divorced should start small with their housing ambitions and scale up later as life affords it.
Be aware of how your credit can be affected
Getting divorced doesn’t directly appear on your credit report. But it can affect your credit. For example, if you and your ex-spouse shared credit cards, checking or savings accounts, you’re still responsible for them, even after the divorce. If your ex-spouse starts using them irresponsibly, it can affect your credit.
When you get divorced, it’s a good idea to monitor your credit score and get a copy of your complete credit report.
Choose your new location carefully
Another major factor recent divorcees tend to overlook is where they choose their next home to be. After a divorce, it’s tempting to indulge in the sort of home you’ve always dreamed of – after all, now that you’re “unattached,” you might be able to get the mid-century modern home in the city with a pool – but that doesn’t mean doing so will be in your best interest.
When selecting a place to live, be sure to consider who else might be affected by your decision. Do you currently have kids? If you have custody during the school year, you’ll want to consider what school district they’ll be in. Also, depending on your custody agreement, you may need to account for the distance you and your kids will need to travel.
Find an expert real estate agent
If you’re currently going through a divorce, it might be best to find a real estate agent who has specialized training and experience working with couples going through a divorce or recent divorcees. An agent with this training and experience can help you set your budget, find optimal housing options and develop a realistic vision for the future.
Beginning a New Chapter
Divorce isn’t easy. But it also isn’t the end. Just because you’ve recently gotten divorced doesn’t mean there aren’t at least a few great housing options available. By being patient, exploring your options and working with an expert, you can find a new home that will meet your needs.
The Short Version
- Contrary to what you might have heard, buying a house after a divorce is very possible. However, every situation will be different
- If you are not yet formally divorced, most mortgage lenders will require a legal separation agreement before you’ll be able to purchase a home on your own
- Instead of immediately jumping back into homeownership, consider taking some time to rent a property while you figure things out